Question 1

According to the short-run aggregate supply curve, if output minus potential output equals zero, then ________.

Accepted Answer

A)  unemployment might be zero 
B)  inflation might be stable 
C)  expected inflation must be stable 
D)  price shocks must be zero 
E)  none of the above 
A)  unemployment might be zero 
B)  inflation might be stable 
C)  expected inflation must be stable 
D)  price shocks must be zero 
E)  none of the above

Question 2

If expectations about inflation are adaptive, they are ________.

Accepted Answer

A)  formed by looking at the future 
B)  likely to change rapidly 
C)  based on past inflation 
D)  all of the above 
E)  none of the above 
A)  formed by looking at the future 
B)  likely to change rapidly 
C)  based on past inflation 
D)  all of the above 
E)  none of the above

Question 3

In the short run ________.

Accepted Answer

A)  the more flexible wages and prices are, the more inflation responds to the output gap 
B)  the more sticky wages and prices are, the more difficult to tell the difference between the short run and long run aggregate supply curves 
C)  if wages and prices are sticky, aggregate output is always at its potential level 
D)  all of the above 
E)  none of the above 
A)  the more flexible wages and prices are, the more inflation responds to the output gap 
B)  the more sticky wages and prices are, the more difficult to tell the difference between the short run and long run aggregate supply curves 
C)  if wages and prices are sticky, aggregate output is always at its potential level 
D)  all of the above 
E)  none of the above

Question 4

If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent, then next period's short-run aggregate supply curve might be ________.

Accepted Answer

A)  π = 5 - 0.5 (13 - 15) 
B)  π = 5 + 0.5 (13 - 15) 
C)  π = 4 + 0.5 (13 - 15) 
D)  π = 5 + 2 (11 - 15) 
E)  none of the above 
A)  π = 5 - 0.5 (13 - 15) 
B)  π = 5 + 0.5 (13 - 15) 
C)  π = 4 + 0.5 (13 - 15) 
D)  π = 5 + 2 (11 - 15) 
E)  none of the above

Question 5

Given the accelerationist Phillips curve △π = - 0.3 (U - 6) + ρ, suppose that inflation in the preceding period was 3 percent, unemployment is 6 percent, and there is a price shock of 2 percent. The current inflation rate is ________.

Accepted Answer

A)  3 percent 
B)  0.2 percent 
C)  5 percent 
D)  1 percent 
E)  none of the above 
A)  3 percent 
B)  0.2 percent 
C)  5 percent 
D)  1 percent 
E)  none of the above

Question 6

The Long-Run Phillips Curve is vertical, suggesting that ________.

Accepted Answer

A)  allowing inflation to rise will not succeed in keeping unemployment low 
B)  changes in unemployment have no lasting impact on inflation 
C)  shifts of the short-run Phillips curve impact inflation, but have no effect on unemployment 
D)  all of the above 
E)  none of the above 
A)  allowing inflation to rise will not succeed in keeping unemployment low 
B)  changes in unemployment have no lasting impact on inflation 
C)  shifts of the short-run Phillips curve impact inflation, but have no effect on unemployment 
D)  all of the above 
E)  none of the above

Question 7

________ is (are) the endogenous variable(s) in the Phillips curve.

Accepted Answer

A)  Expected inflation 
B)  Inflation 
C)  The natural rate of unemployment 
D)  all of the above 
E)  none of the above 
A)  Expected inflation 
B)  Inflation 
C)  The natural rate of unemployment 
D)  all of the above 
E)  none of the above

Question 8

Aggregate Supply Curves (2)
  
-On the graph above,
(a) draw the new short-run aggregate supply curve that results when the economy has been at point 2 for one period, ceteris paribus (do not label the new output level or inflation rate)
(b) on the original AS curve, add a point "3" where output is 10.5. On the vertical axis, label the rate of inflation that corresponds to output of 10.5.
(c) draw the new short-run aggregate supply curve that results when the economy has been at point 3 for one period, ceteris paribus (do not label the new output level or inflation rate)

Accepted Answer

The answer of Aggregate Supply Curves (2)
  
-On the...

Question 9

What can be concluded from Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve?

Accepted Answer

A)  that there is a long run tradeoff between unemployment and inflation 
B)  that there is a short run tradeoff between unemployment and inflation 
C)  that inflation is positively related to the unemployment gap 
D)  all of the above 
E)  none of the above 
A)  that there is a long run tradeoff between unemployment and inflation 
B)  that there is a short run tradeoff between unemployment and inflation 
C)  that inflation is positively related to the unemployment gap 
D)  all of the above 
E)  none of the above

Question 10

In the 1960s, the Phillips curve was ________.

Accepted Answer

A)  a very popular explanation for inflation fluctuations 
B)  consistent with a clear negative relationship between inflation and unemployment 
C)  suggestive of a permanent trade off between inflation and unemployment 
D)  all of the above 
E)  none of the above 
A)  a very popular explanation for inflation fluctuations 
B)  consistent with a clear negative relationship between inflation and unemployment 
C)  suggestive of a permanent trade off between inflation and unemployment 
D)  all of the above 
E)  none of the above

Question 11

Which of the following might cause an upward shift of the modern Phillips curve?

Accepted Answer

A)  an increase in oil prices 
B)  an increase in the price of imports 
C)  wage agreements that include compensation for inflation 
D)  all of the above 
E)  none of the above 
A)  an increase in oil prices 
B)  an increase in the price of imports 
C)  wage agreements that include compensation for inflation 
D)  all of the above 
E)  none of the above

Question 12

Which of the following shows a negative relationship between the output and unemployment gaps?

Accepted Answer

A)  the AS curve 
B)  the Phillips curve 
C)  Okun's law 
D)  the classical dichotomy 
E)  none of the above 
A)  the AS curve 
B)  the Phillips curve 
C)  Okun's law 
D)  the classical dichotomy 
E)  none of the above

Question 13

According to Okun's law, an increase in which of the following is associated with an increase in unemployment?

Accepted Answer

A)  inflation 
B)  output 
C)  expected inflation 
D)  autonomous expenditure 
E)  potential output 
A)  inflation 
B)  output 
C)  expected inflation 
D)  autonomous expenditure 
E)  potential output

Question 14

Which of the following never assumes, either implicitly or explicitly, independence between nominal and real variables?

Accepted Answer

A)  the AS curve 
B)  the Phillips curve 
C)  Okun's law 
D)  the classical dichotomy 
E)  none of the above 
A)  the AS curve 
B)  the Phillips curve 
C)  Okun's law 
D)  the classical dichotomy 
E)  none of the above

Question 15

The Phillips curve was ________.

Accepted Answer

A)  adopted by economic policy teams in the Kennedy and Johnson administrations 
B)  influential in efforts to bring the unemployment rate down to low levels 
C)  discredited in the 1970s, when both inflation and unemployment were relatively high 
D)  all of the above 
E)  none of the above 
A)  adopted by economic policy teams in the Kennedy and Johnson administrations 
B)  influential in efforts to bring the unemployment rate down to low levels 
C)  discredited in the 1970s, when both inflation and unemployment were relatively high 
D)  all of the above 
E)  none of the above

Question 16

According to the accelerationist Phillips curve, ________.

Accepted Answer

A)  expectations adjust continually to the latest information 
B)  increases in inflation cause the unemployment gap to widen 
C)  inflation will change so long as an unemployment gap persists 
D)  all of the above 
E)  none of the above 
A)  expectations adjust continually to the latest information 
B)  increases in inflation cause the unemployment gap to widen 
C)  inflation will change so long as an unemployment gap persists 
D)  all of the above 
E)  none of the above

Question 17

On the modern Phillips curve, the initial impact of productivity improvements that lower the costs of production is shown by ________.

Accepted Answer

A)  an upward movement along the Phillips curve to a higher inflation rate 
B)  an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate 
C)  a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate 
D)  a downward movement along the Phillips curve to higher unemployment rates 
E)  none of the above 
A)  an upward movement along the Phillips curve to a higher inflation rate 
B)  an upward shift of the Phillips curve leading to higher inflation rates for any unemployment rate 
C)  a downward shift of the Phillips curve leading to lower inflation rates for any unemployment rate 
D)  a downward movement along the Phillips curve to higher unemployment rates 
E)  none of the above

Question 18

In Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve, ________.

Accepted Answer

A)  unemployment will, in the long run, reach the natural rate 
B)  in the long run, expected inflation will reach the NAIRU 
C)  inflation is positively related to the unemployment gap 
D)  all of the above 
E)  none of the above 
A)  unemployment will, in the long run, reach the natural rate 
B)  in the long run, expected inflation will reach the NAIRU 
C)  inflation is positively related to the unemployment gap 
D)  all of the above 
E)  none of the above

Question 19

If the natural rate of unemployment declines ________.

Accepted Answer

A)  labor is more heavily utilized 
B)  potential output increases 
C)  the long run aggregate supply curve shifts to the right 
D)  all of the above 
E)  none of the above 
A)  labor is more heavily utilized 
B)  potential output increases 
C)  the long run aggregate supply curve shifts to the right 
D)  all of the above 
E)  none of the above

Question 20

If the short-run aggregate supply curve is π = πe - 1.2 (Y - YP) + ρ, output equals potential output and there is a price shock of minus two, then the inflation rate is ________.

Accepted Answer

A)  2 
B)  πe - 2 
C)  minus 2 
D)  minus 2.4 
E)  none of the above 
A)  2 
B)  πe - 2 
C)  minus 2 
D)  minus 2.4 
E)  none of the above

Exam 11: Aggregate Supply and the Phillips Curve

According to the short-run aggregate supply curve, if output minus potential output equals zero, then ________.

If expectations about inflation are adaptive, they are ________.

In the short run ________.

If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent, then next period's short-run aggregate supply curve might be ________.

Given the accelerationist Phillips curve △π = - 0.3 (U - 6) + ρ, suppose that inflation in the preceding period was 3 percent, unemployment is 6 percent, and there is a price shock of 2 percent. The current inflation rate is ________.

The Long-Run Phillips Curve is vertical, suggesting that ________.

________ is (are) the endogenous variable(s) in the Phillips curve.

What can be concluded from Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve?

In the 1960s, the Phillips curve was ________.

Which of the following might cause an upward shift of the modern Phillips curve?

Which of the following shows a negative relationship between the output and unemployment gaps?

According to Okun's law, an increase in which of the following is associated with an increase in unemployment?

Which of the following never assumes, either implicitly or explicitly, independence between nominal and real variables?

The Phillips curve was ________.

According to the accelerationist Phillips curve, ________.

On the modern Phillips curve, the initial impact of productivity improvements that lower the costs of production is shown by ________.

In Milton Friedman and Edmund Phelps' expectations-augmented Phillips curve, ________.

If the natural rate of unemployment declines ________.

If the short-run aggregate supply curve is π = πe - 1.2 (Y - YP) + ρ, output equals potential output and there is a price shock of minus two, then the inflation rate is ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, Policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, Employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

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